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Dollar inches higher as investors look to Fed decision this week

Arrangement of various world currencies including Chinese Yuan, US Dollar, Euro, British Pound,

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The dollar edged higher from two-week lows on Monday, recovering after Friday’s bout of profit-taking following a robust U.S. jobs report, as investors looked to this week’s Federal Reserve’s policy meeting in which it is expected to raise rates by a quarter percentage point.

“We remain bullish on the dollar, but as Friday’s events suggested, a lot of good news is already priced into the dollar at current levels,” said Shaun Osborne, chief FX strategist, at Scotiabank in Toronto.

“Yields are high enough and spreads are wide enough to keep the dollar broadly supported against its major currency peers for the moment, but additional gains will likely hinge on the messaging from the Fed at the FOMC.”

The Federal Open Market Committee will hold a two-day monetary policy meeting, which starts on Tuesday. Fed funds futures on Monday have priced in a nearly 90-percent chance the Fed will hike rates on Wednesday.

Sterling, which has been one of the worst performers against the dollar over the last two weeks, rose half a percent after the devolved Scottish government demanded the right to hold a new referendum on independence.

In late morning trading, the dollar was slightly higher  against a basket of currencies at 101.31 and was marginally up against the euro. The single European currency was last at $1.0664.

The dollar index earlier fell to a two-week low of 101.01.

Friday’s solid jobs number cemented the case for a rise in U.S. interest rates this week that will long predate any rise in European equivalents.

Britain is expected to formally lodge its request to leave the European Union, but was given another curve ball from Scottish First Minister Nicola Sturgeon’s call for a new referendum on independence.

But Sturgeon’s timeframe for the referendum, which at the earliest could happen by the end of next year when Brexit negotiations are expected to be concluded, partially eased concerns about the issue adding to more political risk over the next 12 months.

Sterling, as a result, held gains against the dollar rising 0.5 percent to $1.2229.

Against the yen, the dollar slipped 0.1 percent to 114.68 yen.

Scotiabank, in a research note, said there is speculation on the potential for changes at the Bank of Japan, including a possible shift to 10-year government bond yield target range from the current zero level. This is considered positive for the yen.

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Patrick Graham in London; Editing by Nick Zieminski)

Dow hits 12th record high close; Trump talks up infrastructure spending

Leaf Group CEO Sean Moriarty (4th L) stands amongst Leaf Group management and board members for the opening bell at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S.

By Caroline Valetkevitch

NEW YORK (Reuters) – U.S. stocks ended slightly higher on Monday and the Dow closed at a record high for a 12th straight session, as President Donald Trump said he would make a “big” infrastructure statement on Tuesday.

The Dow’s streak of record-high closes matches a 12-day run in 1987, with Boeing and UnitedHealth among the biggest boosts for the Dow on Monday. The S&P 500 also closed at a record high. Energy gave the biggest boost to the S&P 500, with the energy index up 0.9 percent.

Trump, who met with state governors at the White House, also said he is seeking what he called a “historic” increase in military spending of more than 9 percent, while he said his administration would be “moving quickly” on regulatory reforms.

The comments came ahead of Trump’s first address to a joint session of Congress Tuesday evening. Investors are looking for more specifics on Trump’s plans, given the hefty gains in the market since the Nov. 8 election.

“Things are moving along in terms of the Trump agenda, but we’ll get a clearer picture after tomorrow night so that might precipitate some buying or selling,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

Hellwig and others said there’s potentially more upside than downside from the address, given how the market has reacted in recent weeks.

Shares of U.S. defense companies – Boeing, Raytheon, General Dynamics and Lockheed Martin – rose after Trump said he would seek to boost Pentagon spending by $54 billion in his first budget proposal.

Boeing was up 1.1 percent while UnitedHealth was up 1.4 percent.

The Dow Jones Industrial Average was up 15.68 points, or 0.08 percent, to close at 20,837.44, the S&P 500 gained 2.39 points, or 0.10 percent, to 2,369.73 and the Nasdaq Composite added 16.59 points, or 0.28 percent, to 5,861.90.

In its 1987 12-day streak of record-high closes, the Dow rose 9.2 percent compared with just a 3.9 percent gain in the recent record run.

While the S&P 500 is up 10.8 percent since the Nov. 8 election, the pace of the rally has slowed this year.

Trump’s promise a few weeks ago of a “phenomenal” tax announcement helped rekindle the post-election rally, driving the main U.S. markets to record highs.

Time Warner ended up 0.9 percent after news that the head of the U.S. Federal Communications Commission does not expect to review AT&T Inc’s planned $85.4 billion acquisition of Time Warner.

AT&T slipped 1.3 percent.

Advancing issues outnumbered declining ones on the NYSE by a 1.55-to-1 ratio; on Nasdaq, a 1.87-to-1 ratio favored advancers.

The S&P 500 posted 63 new 52-week highs and one new low; the Nasdaq Composite recorded 143 new highs and 45 new lows.

(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Sriraj Kalluvila and James Dalgleish)

On election day, Fed official urges U.S. fiscal investments

presidential election at Public School P.S. 56 in the Manhattan borough of New York, USA

By Jonathan Spicer

NEW YORK (Reuters) – U.S. lawmakers should take advantage of low interest rates by making infrastructure investments and encouraging innovations that boost productivity, a Federal Reserve policymaker said on Tuesday as Americans voted in a presidential election.

Charles Evans, head of the Chicago Fed, waded into the fiscal policy debate just as polls opened. An outspoken dove at the central bank, he said his prediction of 1.75 to 2 percent future economic growth was “informed by some assessment of what policies we are likely to entertain” out of Washington.

The Fed, which is expected to raise rates before year end, has occasionally emerged as an issue in the divisive campaign between front runners Hillary Clinton and Donald Trump. Trump, a Republican, said Fed Chair Janet Yellen was keeping rates low to boost President Barack Obama, a Democrat.

The Fed typically avoids prescribing fiscal policies, though its members have been more strident as their plans for a more aggressive policy tightening fizzled in the face of sub-par growth this year.

“Fiscal policy, if it were more stimulative and if it could be directed into more socially productive uses (like) infrastructure investments that strike me as something we need to do anyway, why not do it when interest rates are lower,” Evans said at a Council on Foreign Relations breakfast.

“That would end up probably increasing real rates too and that would help all of us out.”

Clinton has pledged to unveil a plan to rebuild U.S. infrastructure during her first 100 days, saying this would create new jobs. Trump has proposed increasing spending on the U.S. military and infrastructure but says he would reduce spending on other categories by 1 percent each year.

“There is a real risk if we focus too much on the debt,” Evans said, adding that fiscal policies “might incent certain types of investments or innovations.”

“If you’re restricting labor input so that we’re not going to get growth … it’s just simple arithmetic that’s going to be limiting to what our possibilities are,” he added.

Turning to the Fed’s 2-percent inflation mandate, Evans noted a preferred price measure is now up to 1.7 percent.

“We’re close, we’re getting there, and if I had even more confidence that we were going to get to 2 percent then I’d feel better about monetary policy normalization,” he said.

But there remain “reasons to be nervous about inflation,” including low expectations and the tendency of prices to be “inertial” after years below target, he said.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

Wall St stumbles as FBI to review more Clinton emails

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York

By Chuck Mikolajczak

NEW YORK (Reuters) – U.S. stocks erased early gains and turned negative on Friday after the head of the FBI said it will review more emails related to Democratic presidential candidate Hillary Clinton’s private email use.

Each of the three major indexes on Wall Street fell to session lows after FBI Director James Comey said in a letter to several congressional Republicans that the agency had learned of the existence of emails that appeared to be pertinent to its investigation. The election is scheduled to take place in 11 days, on Nov. 8.

“The market turned south the minute the headline hit the tape that the FBI is all of a sudden looking at (Hillary Clinton’s) emails again,” said Ken Polcari, Director of the NYSE floor division at O’Neil Securities in New York.

“The fact they are looking again just raises the prospect that once again they might find something, so the market turned south because it is expecting a Clinton win.”

Wall Street had been higher for most of the session after economic data showed the U.S. economy grew 2.9 percent in the third quarter, its fastest pace in two years, and upbeat earnings from Google parent company Alphabet Inc.

Alphabet shares were up 0.6 percent at $821.85.

While the report supports the case for an interest rate hike, the Federal Reserve is unlikely to make a move at its meeting next week, as it falls just days ahead of the U.S. presidential election.

The market is largely expecting the central bank to hike rates in December, with the odds of a rate increase that month  at 73.6 percent, according to the CME Group’s FedWatch tool.

Investors also digested the latest wave of earnings reports with the hope the latest quarter snaps a year-long earnings recession.

Nearly 73 percent of the S&P 500 companies that reported have topped Wall Street expectations, with growth for the quarter now expected to be 3 percent, according to Thomson Reuters I/B/E/S. The quarter had been expected to show a decline of 0.5 percent at the start of October.

On the negative side, Amazon.com was set for its worst day in nearly nine months, falling 4.8 percent to $778.74 after the online retailer warned that heavy investments in the crucial holiday quarter would hurt profits. The stock was the top drag on the S&P and the Nasdaq.

The Dow Jones industrial average <.DJI> fell 37.49 points, or 0.21 percent, to 18,132.19, the S&P 500 lost 9.81 points, or 0.46 percent, to 2,123.23 and the Nasdaq Composite dropped 29.05 points, or 0.56 percent, to 5,186.93.

Each of the major indexes were poised to post a decline for the week.

Amgen plunged 10.1 percent to $144.30 after the world’s largest biotechnology company’s sales for its flagship drug disappointed investors and analysts.

Declining issues outnumbered advancing ones on the NYSE by a 1.65-to-1 ratio; on Nasdaq, a 1.37-to-1 ratio favored decliners.

The S&P 500 posted 10 new 52-week highs and 9 new lows; the Nasdaq Composite recorded 42 new highs and 112 new lows.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)